Technology

TOKYO: Fujitsu, Japan's biggest provider of computer services, plans to increase sales at the business to make up for declining hardware demand.

The company is expanding the business in Europe and North America and plans to boost sales of services including cloud computing to corporate customers, Kazuhiko Kato, chief financial officer, said in an interview. Fujitsu may acquire a company to accelerate growth, he said, declining to name potential targets."We should spend time building our revenue base," the 61-year-old executive said at Fujitsu's headquarters in Tokyo on November 16. "It will take time to boost revenue in the services field, but that will become a buffer for times when hardware sales are falling."

Fujitsu is forecasting a third straight year of declining profit as a worsening European economy dents demand for its computers and services including system integration and cloud computing. A shortfall of about ¥100 billion ($1.2 billion) at the company's UK pension fund will reduce free cash flow this fiscal year, he said.

"Targeting companies rather than consumers is a good bet to spur sales," Mitsuo Shimizu, a Tokyo-based analyst at Iwai Cosmo Holdings., said of Fujitsu's strategy. Corporate demand for computing services is growing, he said. Fujitsu may release a new medium-term business plan before April, Kato said.

Profit forecastThe company cut its profit forecast 58 per cent to ¥25 billion for the year ending March 31 as it struggles to spur overseas sales because of a worsening economy in Europe, it said on October 31. Sales may total ¥4.42 trillion, or 2.4 per cent less than the previous estimate, the company said.

Panasonic, Renesas Electronics and Fujitsu are suffering from plunging demand for system LSI chips used in televisions. LSI chips pack memory, microprocessing and other functions, such as processing graphics, into a single component.

Global TV demand fell 8 per cent from a year earlier in the second quarter of this year, according to DisplaySearch, led by a 77 per cent plunge in shipments in Japan. Panasonic president Kazuhiro Tsuga said in July the company may consider merging its LSI business with Fujitsu's and Renesas'. Kato declined to comment on the plan.

Chip factoriesFujitsu will shut a plant assembling system chips and sell two factories to J-Devices, the two companies said on August 31. Denso, a Toyota Motor-affiliated parts maker, will buy a factory to make the chips from Fujitsu, the companies said in April.

Fujitsu's free cash flow for the year ending March 31 will be ¥140 billion short of the company's previous estimate because of costs to reorganise chip production and the UK pension-reserve shortfall, Kato told investors and analysts on October 31. Falling interest rates in the UK contributed to the shortfall, the company said in April.

Free cash flow may recover to about ¥150 billion in about three years from an expected negative ¥40 billion this fiscal year, the chief financial officer said. Fujitsu is among Japanese companies that expect an impact on their balance sheets.

from a change in financial reporting standards that will affect how they account for pension-reserve shortfalls from April. Fujitsu will be short by about ¥300 billion at its Japanese pension fund, Kato said.